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AG Sues, Settles Over Deceptive "Free" Offers
December 11, 2006
Attorney General Steve Rowe today announced a $14.5 million, 15‑state settlement with Chase Bank, Chase Home Finance and Trilegiant Corp. that will resolve allegations the companies unlawfully deceived consumers into paying for membership programs that claimed to provide discounts on car and home repair, shopping, and other goods and services.
"This was a misleading marketing scheme. Consumers had no idea that by cashing a $2.50 check they were authorizing Trilegiant to place charges on their credit card," said Rowe. "We urge consumers to let their banks and credit card and mortgage companies know that they do not want to be contacted by third party marketers. Federal law requires that the companies respect consumer wishes to keep information private."
Rowe also encouraged consumers to advise their banks and credit card and mortgage companies in writing that the companies may not share the consumers' personal financial information with third parties. To do this, consumers should obtain, complete and return their financial institutions' financial privacy forms. Rowe directed consumers to the Federal Trade Commission's website for more information about the right to "opt out" of financial information sharing. http://www.ftc.gov/bcp/conline/pubs/credit/privchoices.pdf
The settlement announced today resolves claims by the Attorney General that Chase and Trilegiant solicited consumers with offers of "free" trials in membership programs, without adequately informing consumers they would be charged automatically if they did not affirmatively cancel within a specified period of time.
The solicitations often included a check for a small amount of money, between $2 and $10, which consumers typically thought were rebates or rewards from Chase Bank or Chase Home Finance. However, by cashing the check, the consumer unknowingly authorized Trilegiant to place charges on their Chase Credit Card or other account after "free" trial period ended, according to the complaint. The solicitations were sometimes included in the consumers' mortgage or credit card statements, the complaint alleged, or in mailings with Chase's logo on the envelope and letterhead. These tactics prevented consumers from realizing the solicitations were in fact sent by Trilegiant and not by Chase or another business partner.
If consumers did not affirmatively cancel within the required time, Trilegiant automatically billed the membership fees to consumers' credit accounts either monthly or annually, depending on the particular membership program. Trilegiant then charged consumers repeatedly until they finally cancelled their membership. Many consumers belatedly discovered they had unwittingly purchased memberships in several different clubs, the complaint alleged.
The Trilegiant membership programs include, but are not limited to, AutoVantage Gold Service, AutoVantage Service, Buyers Advantage Service, CompleteHome Service, Just for Me, Pet Privileges Service, Shoppers Advantage Service, and Travelers Advantage Service.
Regarding Chase's role in the alleged unlawful business practices, Chase and Trilegiant entered agreements under which Trilegiant gained access to Chase customers for the purpose of marketing the membership programs.
To protect consumers from unlawful deception in the future, the settlement requires reforms of Trilegiant's and Chase's business practices. Future solicitations sent by Trilegiant, or any other company that solicits Chase customers in a similar manner, must clearly disclose the all terms of any "free trial," including when and how the customer will be billed for any membership, and how to cancel a membership. Additionally, the settlement forbids Chase and Trilegiant from engaging in any deceptive conduct in the marketing of these membership programs. The prohibited practices include identifying the solicitation as a "reward" or "rebate" offer, or that any check or other premium offered as part of a solicitation is anything other than a benefit or incentive for the purchase of a membership.
The settlement requires Trilegiant to pay a combined $8.325 million in restitution to all consumers in Maine and the other 14 states who either have already complained to Trilegiant or their Attorney General, or who complain in writing within the next nine months.
Trilegiant and Chase also will pay $6.175 million to the settling states to cover civil penalties and recoupment of costs and fees. Trilegiant is paying $477,128 to Maine, and Chase is paying $175,000.
Consumers who signed up for membership in a Trilegiant club through any bank or other company they did business with and who were first charged membership fees on or after July 1, 2001, are eligible to receive restitution. Trilegiant is also required to send renewal notices to consumers who have active memberships advising them that they have purchased the membership and how to cancel the membership if they wish. If there are not enough funds to make full restitution to all consumers who complain, then those consumers who complain over the next nine months will get a pro rata share. All consumers who have already complained will receive full restitution.
In addition to Maine, the Attorneys General in the following states joined the settlement: Alaska, California, Connecticut, Illinois, Iowa, Michigan, Missouri, New Jersey, North Carolina, Ohio, Oregon, Pennsylvania, Tennessee, Vermont and Washington.
Consumers who are trying to find out if they unknowingly paid for a membership program should carefully examine their credit card or mortgage statements and monitor their mail for any notices from Trilegiant. They can also contact Trilegiant via its internet website, www.trilegiant.com or by mail at Trilegiant Corporation, 100 Connecticut Ave, Norwalk, CT 06850, ATTN: K. Buonagurato. Written complaints requesting restitution for unauthorized charges can be submitted to Linda J. Conti, Assistant Attorney General, Attorney General's Office, 6 State House Station, Augusta, ME 04333-0006 or by e-mail to firstname.lastname@example.org.
Attorney General Rowe praised Assistant Attorney General Linda Conti for her excellent work on the settlement, which was the result of several months of negotiations.
Rowe and Conti both advised that "Consumers should monitor their credit card and mortgage statements each month to check for unauthorized and disputed charges, including but not limited to fees assessed for membership programs such as those offered by Trilegiant. Consumers who see an unauthorized charge should write to their credit card or mortgage company and also file a complaint with the Attorney General's Office."